Third Party Retaliation Claims under Title VII, the Discovery Rule under the NJLAD, and the Self-Critical Analysis Privilege under the FLSA

Employers conducting business in the New Jersey / New York markets should take note of several recent employment-related decisions. In Thompson v. North American Stainless, LP, 2011 U.S. LEXIS 913 (Jan. 24, 2011), the United States Supreme Court ruled that an employee who claimed he was fired because his fiancée filed a sex discrimination charge against their mutual employer could pursue a retaliation claim under Title VII of the Civil Rights of 1964. In Henry v. New Jersey Department of Human Services, 2010 N.J. LEXIS 1260 (Dec. 10, 2010), the New Jersey Supreme Court held that a terminated employee should have the opportunity to avail herself of the “discovery rule” and demonstrate that she acted reasonably in pursuing her discrimination claim in order to avoid a dismissal on statute of limitations grounds. In Craig v. Rite Aid Corporation, 2010 U.S. Dist. LEXIS 137773 (M.D. Pa. Dec. 29, 2010), discussed in the HR Tip of the Month, the Middle District of Pennsylvania declined to recognize the “self-critical analysis” privilege to protect a company’s voluntary internal assessment of its compliance with the Fair Labor Standards Act (FLSA), labor laws and existing bargaining agreements.

Thompson v. North American Stainless, LP

Eric Thompson and his fiancée were both employed by North American Stainless (NAS). Three weeks after being notified by the Equal Employment Opportunity Commission (EEOC) that Thompson’s fiancée had filed a charge of discrimination, NAS fired him. Thompson then filed a charge with the EEOC and later filed suit in federal court claiming that NAS fired him in order to retaliate against his fiancée.

The district court granted summary judgment to NAS, holding that Title VII did not permit third party retaliation claims. An en banc panel of the Sixth Circuit affirmed, concluding that because Thompson did not engage in any statutorily protected conduct, he was not included in the class of persons for whom Congress created a retaliation cause of action. The United States Supreme Court granted certiorari, and in an 8-0 decision, reversed the appellate panel.

The Court considered two questions: first, whether NAS’s firing of Thompson constituted unlawful retaliation; and second, did Title VII grant him a cause of action. The Court had little difficulty answering the first question in the affirmative, finding that if the facts alleged by Thompson were true, then his termination violated Title VII. Relying on past precedent, Justice Scalia, writing for the Court, observed that Title VII’s anti-retaliation provision, unlike the substantive provision, was not limited to discriminatory acts that affected the terms and conditions of employment. Rather, it prohibited any employer action that might dissuade a reasonable worker from making or supporting a charge of discrimination. The Court thought it obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.

Regarding the second question, the Court addressed whether “aggrieved” under Title VII should be construed in a matter consistent with Article III standing, which requires only injury in fact caused by the defendant and remediable by the court. Justice Scalia concluded that “aggrieved” must be construed more narrowly. He also rejected the position advanced by NAS – that a “person aggrieved” refers only to the employee who engaged in protected activity. The Court adopted the “zone of interests” test, holding that “aggrieved” under Title VII enabled a suit by any plaintiff with an interest “‘arguably [sought] to be protected by the statutes.’” Applying that test, the Court concluded that Thompson fell within the zone of interests protected by Title VII, as (i) he was an employee of NAS, (ii) the purpose of Title VII was to protect employees from unlawful actions, and (iii) he was not an accidental victim of retaliation (but rather injuring him was NAS’s way of punishing his fiancée).

Henry v. New Jersey Department of Human Services

In April 2004, Lula Henry (Henry), who held a Master’s degree, was hired by Trenton State Psychiatric Hospital at an entry-level nursing position. In late Spring/early Summer 2004, Henry developed initial concerns that racial discrimination explained why she was hired at an entry level position, though her concerns were uncorroborated by any firm evidence. In late Summer 2004, Henry questioned her classification and requested reclassification; in response she remained assigned to her entry-level position. In November 2004, Henry resigned from Trenton State in order to take a position with another entity.

In the Spring of 2006, Henry was informed by a union representative that a Nigerian nurse had contested the placement of a less qualified Caucasian nurse and that there were widespread claims of racism at Trenton State. Henry also learned that a Caucasian nurse with similar credentials to hers was immediately hired into a higher job classification, contrary to what she was told about her placement. Henry claimed that prior to learning this information she had no factual basis to substantiate her earlier suspicions of race-based discrimination.

On July 24, 2007, Henry filed a complaint alleging racial discrimination in defendants’ hiring practice and retaliation in violation of the New Jersey Law Against Discrimination (NJLAD). Defendants moved for summary judgment based on the two-year statute of limitations applicable to NJLAD claims. The trial judge granted the motion, determining that Henry’s action accrued in 2004 and was not tolled by the discovery rule. The Appellate Division affirmed, and the Supreme Court granted certification. At issue was the impact of the “discovery rule” on NJLAD claims. That rule “delays the accrual of the action until the plaintiff ‘discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis of a cause of action.’”

Henry argued that her NJLAD claims did not accrue until 2006 because that is when she had some measure of corroboration of her concerns. Defendants argued that the discovery rule should not apply to NJLAD cases, but that even if it did, the rule would not be appropriate under the facts of this particular case.

The Court explained that the discovery rule is a well-established equitable doctrine that is applied when the statute of limitations would cause unnecessary harm without advancing its purpose. However, the Court did not find that there was an equitable basis on which to extend the statute of limitations on Henry’s retaliation claim, because that claim must have accrued at or before the date of her resignation in November 2004. As a result, the Court affirmed the Appellate Division’s dismissal of the retaliation claim.

The Court reached a different result on Henry’s discrimination claim. Noting its approval of the use of the discovery rule in LAD cases “when and where appropriate,” the Court held that this case might present such a circumstance. Henry had initial concerns in 2004 about her hiring and classification, but the reason she was given in response had nothing to do with racial discrimination. That, according to the Court, may have led her not to pursue the issue, thereby requiring the tolling of her cause of action. The Court held Henry was entitled to assert that she did not have reasonable suspicion of racial discrimination, even by the exercise of reasonable diligence, until 2006 when, among other things, she learned that less qualified Caucasian nurses were hired into advanced positions and she was told by her union representative about other claims of racial discrimination. Under these circumstances, the Court decided that Henry should get a hearing at which she could show that she acted reasonably in pursuing her claim of discrimination.